It’s now Greece’s crisis, not the Greek crisis

BusinessDay contributing editor

It might seem pedantic, but there’s a big difference between what was the Greek crisis and what’s now Greece’s crisis.

When Greece’s massive debt hit the fan five years ago as the result of dumb bankers being blind to industrial-scale tax evasion, grandiose government spending and insanely indulgent social security topped by widespread rorting, it was the Greek crisis that quickly morphed into the PIGS or PIIGS crisis – Portugal, Ireland, Italy, Greece and Spain.

In any event, there’s a strong case made for Greece being better off by in effect declaring bankruptcy and leaving the euro zone.

When markets were panicking then, most of the Greek debt was owed to banks. The possibility of Greek default threatened Europe’s banks with a contagion effect that would have spread through the world.

As Band-Aids were applied to Athens and various half-hearted promises were made about reform, there were plenty of commentators suggesting that Greece’s debt could not be fixed. Even with bond holders taking a sharp haircut, the debt was simply too large for the little Greek economy to work its way out from under – and that was without the impact of greater austerity.

But the refinancing and emergency funds weren’t really about solving the Greek debt problem. They were about kicking the Greek can down the road until the threat of contagion was contained, until the other PIIGS members were stabilised, and most of the Greek debt was transferred from banks that couldn’t handle the loss to institutions that could.

Five years later, it is primarily Greece’s crisis, rather than the Greek crisis. There are still concerns of course – markets are all interconnected and don’t like uncertainty, fear is a reason for international investors to seek what they consider is relative safety – but it’s now Greece that is doomed to suffer most of the pain whatever deal is done or not done in Brussels.

It is a big, colourful story that is getting disproportionate play here, partly because of the large Greek population in Australia, partly because the idea of Western country’s banks being closed and cash rationed is rather frightening. Barring some institutional catastrophe, there are almost no economic links between Australia and Greece that matter.

Indeed, much of the story is being covered from the social and political angles rather than the economic. The protests, the genuine tales of people suffering a slide back to Second World status, the dramatic politics make good television. And in some quarters, the idea of a brave left-wing government taking on the evil capitalists stirs hearts. . . . .

To read on please go to the above link.

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Published by auntyuta

Auntie, Sister. Grandmother, Great-Grandmother,
Mother and Wife of German Descent
I've lived in Australia since 1959 together with my husband Peter. We have four children, eight grandchildren and two great-grandchildren. I started blogging because I wanted to publish some of my childhood memories. I am blogging now also some of my other memories. I like to publish some photos too as well as a little bit of a diary from the present time. Occasionally I publish a story with a bit of fiction in it. Peter, my husband, is publishing some of his stories under berlioz1935.wordpress.com
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3 thoughts on “It’s now Greece’s crisis, not the Greek crisis”

“When Greece’s massive debt hit the fan five years ago as the result of dumb bankers being blind to industrial-scale tax evasion, grandiose government spending and insanely indulgent social security topped by widespread rorting, it was the Greek crisis that quickly morphed into the PIGS or PIIGS crisis – Portugal, Ireland, Italy, Greece and Spain.”

I found the whole article very interesting, Stuart. When I look again at just one paragraph, I wonder how in a democracy it is possible that a government and the bankers can act so much in the disinterest of the common people. It is always the less prosperous people who suffer the consequences of war and in this case the consequences of an incompetent government. Much sooner people should have been given the chance to vote in a different government, instead their government managed to accumulate more and more debt. Everyone could see that Greece would never be able to serve such a huge debt. They could not even manage to pay the interest they were asked to pay. This is absolutely ridiculous. When it was obvious that Greece had had run into too much debt. the interest payments should have been put on hold, and rather then lending them more and more money some country or institution should have helped them to improve their economy as well as avoid widespread unemployment.

Which government of a small country is actually competent enough to make industrial-scale tax evasion as well as widespread rorting impossible?

Also, I wonder in what way the Greek government was overspending? And what should be called ‘indulgent’ social security? Are not people
entitled to get their pensions when they reach a certain age? Should they not get unemployment benefits if they lose their job?

Whose fault is it when a first world country sinks to the status of a second world country? I would say, the way to sustained prosperity is to avoid wars and be on the look-out for corruption and unscrupulous institutions skimming off too much profit.